Azernews.Az

By Bloomberg

An Indian court granted relief to Nestle SA in a case that has pitted the nation’s food regulator against the Swiss giant over the quality of its iconic Maggi noodles. Shares of the company’s local unit rallied.

The Bombay High Court today set aside the June 5 order by the Food Safety and Standards Authority of India to recall the noodles, and said that Nestle could restart sales of the snack if fresh tests done at a certified laboratory were found to be acceptable. The company needs to submit test reports within six weeks, the court said.

Sales of the noodles had stopped two months ago after the food regulator ordered the nationwide recall as it said government tests found the noodles contained too much lead.

Nestle India, the country’s top seller of noodles, filed the case on June 11 challenging the recall. A favorable ruling would validate the Swiss foodmaker’s insistence its products had been tested without finding abnormal levels of lead, said Naveen Trivedi, an analyst at Trust Financial Consultancy Services Pvt., before Thursday’s judgment.

Nestle’s India unit on July 29 reported its first quarterly loss in at least 15 years due to the recall and sales halt on its biggest product. The cost of removing the product from the market led to a one-time exceptional loss of 4.52 billion rupees ($69 million) -- nearly 1.5 times the average profit in the last four quarters, the New Delhi-based company reported.

“Nestle can easily regain the momentum that’s been lost,” Trivedi said via phone before the judgment. “If they can prove that technically the government lab tests were wrongly done, they can go to court and seek damages.”

Nestle India’s shares rose 2.4 percent to 6,381 rupees as of 12:15 p.m. in Mumbai, after rallying as much as 5 percent after the judgment.